Friday, July 20, 2012

Mobutu's Disneyworld: Odious Debt in Africa

During his long tenure as the dictator of Zaire (now Democratic Republic of the Congo), Mobutu Sese Seko was guilty of many things, but personal frugality was not one of them.Take, for example, his 1982 trip to Disneyworld; Mobutu invited 100 of his closest friends to join him in experiencing the thrills of the Space Mountain roller coaster and the Many Adventures of Winnie the Pooh (in which Mobutu may have been able to help save Piglet from the “Floody Place Falls”). This trip cost Mobutu roughly two million dollars, an amount offset by the fact that the dictator “made little distinction between the nation’s resources and his personal wealth.”[i] Or take for example Mobutu’s choice of residences when vacationing abroad, which the Washington Post noted as “a lavish townhouse in Paris, a 32-room estate in Switzerland, and a 16th century castle in Spain.”[ii] Or even simply his personal salary as “President,” which at one point surpassed total national spending on all social services combined.[iii]While criticizing the exploits of a kleptocrat is relatively uncontroversial, connecting Mobutu’s actions to the current debt crisis faced by the world’s developing countries raises some uncomfortable questions for the West. Why did western countries continue to lend money to a regime labeled “the kleptocracy to end all kleptocracies” by a member of Congress?[iv] Why did Western banking institutions help nearly $18 billion leave the Congo in the form of capital flight during Mobutu’s reign?[v] Why did law enforcement officials recover only a few million dollars of Mobutu’s purported $8 billion in personal wealth in Swiss banks?[vi] And what role did the West have in perpetuating Mobutu’s crimes?Perhaps the most important question, however, is why the Democratic Republic of the Congo (DRC) currently owes more than $12 billion in external debt, when much, if not all, of that money was simply stolen from its people by an unelected tyrant. Indeed, the DRC offers an incredibly lucid example of a little-known category of debt known as “odious debt.” Redundant? Perhaps. But odious debt is not only a particularly abhorrent version of external debt, it also serves to illuminate the truth that is at the core of the entire international debt issue: those people who today suffer the consequences incurred by repaying the third world’s external debt rarely benefited from the loans in the first place.The term odious debt was first coined in 1927 by Russian lawyer Alexander Nahum Sack, who argued that “if a despotic power incurs a debt not for the needs or in the interest of the State…this debt is odious for the population of all the State.”[vii] Odious debt in its simplest form is associated with a dictatorial regime that borrows money either to strengthen its hold on power or to enrich its leaders and is then overthrown, leaving the general public to pay off its debts. A more exact definition would be that debt is odious if the people of a state do not have a say in incurring the debt and are not the beneficiaries of the money.While the DRC is a textbook example of odious debt (economists James Boyce and Leonce Ndikumana argue that “post-Mobutu DRC could serve as the most important test case for the doctrine of odious debt since its introduction a century ago”), it is certainly not the only country in which a largely impoverished citizenry is being ordered to pay off the debts accumulated by a former dictator.[viii] Indeed, the most shocking aspect of odious debt, other than the sheer brazenness of the demand that odious debts be honored, is its breadth. Kenyans, 50% of whom live below the poverty line, are forced to repay the debts of Daniel Arap Moi, who stole hundreds of millions of dollars from general funds and sent the money abroad through a variety of backchannels.[ix] And South Africans still owe money borrowed by the ousted Apartheid regime, raising the possibility that black South Africans are paying back loans used to fund the security apparatus that enforced their status as second-class citizens.Despite its clear moral contours, odious debt has its share of gray area. Both of the terms central to determining the odiousness of debt - the “consent” and “interest of” the people - are open to ambiguity, thus rendering odious debt more of a spectrum than a firm category. For example, would debt be odious if it were incurred by a regime that won unfair elections? How “fair” do elections have to be for the government to accept loans with the “consent” of the population? Similarly, defining the national interest is not always simple, and thus drawing a line to determine whether or not borrowed money was put to use in a manner consistent with that interest can be a difficult task. While some expenditures are certainly on one side of that line (healthcare, education) and some are certainly on the other side of that line (trips to Disneyworld, Spanish castles), there remains a wide range of expenditures that might be more difficult to classify. Military spending is often in the national interest, but not always. The same goes for development projects. And corruption can taint otherwise noble endeavors; if a country borrows money to build a hospital and some of that money is siphoned off by corrupt officials, is the resultant debt odious?Such ambiguities cannot be dismissed, but when the world’s poorest countries are paying off the debts of former dictators rather than providing health, education, and infrastructure development for the world’s poorest people, it is important not to miss the bigger picture. While individual loans may be more or less odious than others, the larger importance of the doctrine of odious debt lies in the manner in which it illuminates the nature of the third world’s external debts. As James Picardo of Jubilee Scotland noted in an interview last fall, it’s important to “keep inverting these terms like debtor and creditor, because they're historically totally upside down. On so many levels it is we who owe the south, because of slavery, extraction, and now climate, which makes it nonsense to talk about 'debt forgiveness' of these countries.”[x] Odious debt furthers this point by raising additional questions as to who, exactly, is the debtor. In the DRC, it wasn’t the Congolese people who were borrowing money, it was Mobutu. Why, then, are the Congolese people being asked to pay it back?Seen this way, odious debt is just another angle with which to attack the dominant debt paradigm. Perhaps it is a redundant term, and perhaps this redundancy will serve as an exclamation point that pushes policymakers in the West to move toward debt cancellation for countries in need, and toward a fairer system of lending and borrowing for future generations.

[x] “Third World Debt on Trial,” by Jane Herbstritt, in the Climate Debt Blog of the World Development Movement. September 26, 2011. http://www.wdm.org.uk/blog/third-world-debt-trial-peoples-debt-tribunal.

About Me

I am a graduate of the University of San Francisco's master's in International Studies Program, where I wrote my thesis on Odious Debt in Sub-Saharan Africa. This site will focus on African issues, particularly debt, politics, and U.S. foreign policy. I hope you find it interesting.
email: andrew.hanauer@gmail.com